Hanover Finance co-owner Mark Hotchin "would like to think" that more than half a billion dollars owed to 16,500 investors is safe.
Yesterday Mr Hotchin, joint owner of the company with Eric Watson, said his board was suspending capital and interest repayments from investments with Hanover Finance and its subsidiaries United Finance Ltd, and sister company Hanover Capital Ltd.
The Hanover Finance book comprises about 13,000 investors with $465 million in debentures.
United Finance has around 2400 investors with $65m in debentures.
Hanover Capital, offering secured preferential bonds, has around 1100 investors with $24m worth of bonds.
Mr Hotchin today told Radio New Zealand the board had decided to take a proactive stance and "take this move before we were actually at a point where we ran out of money".
"So whilst we could've sort of bobbed along for some months yet, the view was that we're better to do it now in a more orderly structured fashion and come up with a solution that is hopefully in everybody's best interest," he said.
A detailed proposal is to be presented to investors in late August after consultation with the trustees -- New Zealand Guardian Trust for Hanover Finance, and Perpetual Trust for United Finance and Hanover Capital.
About half the 49 finance companies operating in New Zealand 18 months ago have either collapsed or been unable to repay deposits on maturity.
Analysts have predicted the $18 billion sector will shrink to about 20 companies.
Asked on radio today if the 16,500 Hanover investors would get most of their money back, Mr Hotchin replied, "we would hope".
"Perfect world obviously they would get all their money back. It's going to take time, so there's a cost to time," he said.
Mr Hotchin said a combination of factors had made it "very difficult" for Hanover to continue.
Those factors included deterioration in the market, the recent collapse of three other quite significant finance companies which had a fairly big impact on Hanover's reinvestment rate, coupled with the global credit crunch.
"People who have borrowed money from us in this market are having difficulty repaying and/or selling their properties or projects, and what we're asking for is more time to be able to deal with those things," he said.
Hanover had a number of people who thought they had refinancing or sales opportunities, which they had found increasingly difficult to bring to fruition, and as a consequence had a difficult time trying to repay Hanover.
Hanover had an ongoing assessment of its loan to value ratio, and as the market deteriorated that became a much bigger issue, Mr Hotchin said.
"But we think the lending that we've done is of a reasonable quality that over time we should be able to recover most, if not all, of it."
